Purpose, Characteristics and Advantages of Accounting

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Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 28, 2023

Purpose of Accounting

  • The primary purpose of accounting is to provide information that is useful for decision-making
  • Accounting provides reliable information about the sources and trends of revenues within an enterprise
  • Accounting provides authenticated information about the economic resources and obligations of a business
  • Accounting provides reliable information about changes in the financial and investment activities of a business
  • Accounting gives reliable information to outsiders in the form of various disclosures, enabling them to assess the credibility of the business

Characteristics of Accounting

Accounting in the modern era is marked by the following characteristics:

  • Since accounting deals with uncertainty and complexity, professional judgment and estimates are imperative
  • Accounting statements can be prepared on:
    • A cash basis, which recognizes an event as a transaction only if cash is received or paid
  • Accounting is by nature historical which means the recording of past happenings

Advantages of Accounting

  • Accounting gives valuable information for making managerial decisions
  • It provides helpful information to investors for estimating the risk, gains, and opportunities associated with a business
  • Accounting provides critical information to creditors who are worried about their claims on the business
  • It provides useful information about the management's ability to achieve the maximum benefit from limited resources
  • Accounting also provides information to the business that can be helpful to increase its earning capacity

Purpose, Characteristics and Advantages of Accounting FAQs

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About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.